Tests of Parameters Instability: Theoretical Study and Empirical Applications on Two Types of Models (ARMA Model and Market Model)

Authors

  • Sahbi FARHANI Economic Sciences, Faculty of Economic Sciences and Management of Tunis, Tunis El Manar University-TUNISIA

Abstract

This paper considers tests of parameters instability and structural change with known, unknown or multiple breakpoints. The results apply to a wide class of parametric models that are suitable for estimation by strong rules for detecting the number of breaks in a time series. For that, we use Chow, CUSUM, CUSUM of squares, Wald, likelihood ratio and Lagrange multiplier tests. Each test implicitly uses an estimate of a change point. We conclude with an empirical analysis on two different models (ARMA model and simple linear regression model).

Keywords: Tests of parameters instability; Structural change; Breakpoints; ARMA model; SLRM.

JEL Classifications: C22; G12; Q43

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Author Biography

Sahbi FARHANI, Economic Sciences, Faculty of Economic Sciences and Management of Tunis, Tunis El Manar University-TUNISIA

Department of Economic Sciences

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Published

2012-05-08

How to Cite

FARHANI, S. (2012). Tests of Parameters Instability: Theoretical Study and Empirical Applications on Two Types of Models (ARMA Model and Market Model). International Journal of Economics and Financial Issues, 2(3), 246–266. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/173

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